JUDY WOODRUFF: Last night, our economics correspondent, Paul Solman, reported on the ominous collapse
of the antibiotics industry, just as bacterial infections are increasing as a side effect
of the coronavirus.
Tonight, he explains why.
And please note, much of the video for this story was shot before the pandemic.
It's part of our regular series Making Sense.
PAUL SOLMAN: So, you warned us this was going to happen, right?
KEVIN OUTTERSON, Boston University School of Law: I wish I'd been wrong, but yes.
PAUL SOLMAN: That's antibiotics pricing expert Kevin Outterson, whom we previously interviewed
in 2017, when antibiotics start-ups were worth hundreds of millions of dollars. What's happened
to the industry since?
KEVIN OUTTERSON: Four out of the last 14 drugs approved by the FDA went into bankruptcy in
2019. And there'll be more drugs that are going to fall into bankruptcy in 2020.
PAUL SOLMAN: As a result, big pharma has dropped antibiotic development, and small firms making
effective new drugs are nearly worthless.
And the pandemic is making things worse because of the need for new antibiotics to prevent
and treat dangerous secondary infections in COVID-19 patients, especially those on ventilators.
LATANYA ROBINSON, Coronavirus Patient: It's horrifying, because you just can't get your
breath. And all you can think in your head is, am I going to end up on a ventilator?
PAUL SOLMAN: Here's the quandary, though. The economic problems facing the industry
were perfectly clear three years ago.
The first, as one-time pharma exec John Rex put it, doctors were reluctant to prescribe
new antibiotics.
DR. JOHN REX, Infectious Disease Specialist: When you invent a new antibiotic that hits
the very most resistant bacteria in the world, what we as a community want you to do with
it is, sit on it, OK, and save it for just that rainy day.
PAUL SOLMAN: That's because using a new super drug too soon could spur the evolution of
resistance, rendering the new drug worthless.
DR. JOHN REX: Once we have found this precious jewel, we need to protect it, because every
use of an antibiotic, even a correct use, drives resistance.
PAUL SOLMAN: Stewardship, it's called, but not a great way to make money.
A second hurdle, said infectious disease specialist Lindsey Baden:
DR. LINDSEY ROBERT BADEN, Dana-Farber Cancer Institute: Often, the treatments are short,
a week or two, and intermittent. And that's very different than for hypertension, diabetes,
hypercholesterol, where it's a treatment every day for the rest of your life.
PAUL SOLMAN: OK, so why not just hike the prices of superbug drugs, for the sake of
discussion, oh, say $10,000 a treatment. That's what they're worth, says Outterson.
KEVIN OUTTERSON: When you consider what oncology drugs, cancer drugs or orphan drugs that are
being priced at hundreds of thousands of dollars, even a couple above a million, you know, when
you think of an antibiotic that saves the life of the person, they're going to die from
this infection, $10,000 is really a bargain.
PAUL SOLMAN: And that's why pharma start-ups are usually so attractive, says investor Richard
Anders.
RICHARD ANDERS, Life Sciences Investor: There are a lot of drugs which make a lot of money
at very high prices.
PAUL SOLMAN: But, he says, investors have come to realize new antibiotics can't be priced
that high.
RICHARD ANDERS: Because the political system would be in an uproar, and the drug companies
want nothing to do with that, because of all the flak they're already taking for fighting
these battles on other fronts.
DR. HELEN BOUCHER, Tufts Medical Center: Because of the societal good of antibiotics, they
feel like they can't charge more.
PAUL SOLMAN: Infectious disease specialist Dr. Helen Boucher.
DR. HELEN BOUCHER: The reason that we have been told that big pharma has disengaged is
because they're not making enough return on their investment, plain and simple.
PAUL SOLMAN: But only big pharma can efficiently get these new drugs to market.
RICHARD ANDERS: As an early-stage life science investor, I think, when I invest in a company,
how is that company going to get acquired by a larger company? And if the larger companies
aren't acquiring, then it's really difficult to invest in companies that are early in the
market.
PAUL SOLMAN: Compare that to drugs for viral diseases. Even before the frantic search for
a coronavirus cure, the antiviral market was booming, more than doubling over the last
decade, while the antibiotics market shrank.
But what, besides the increasing aversion to raising antibiotic prices, has changed
in the last three years? The economics of hospitals.
KEVIN OUTTERSON: If you go into a hospital with bacterial pneumonia, the hospital gets
a fixed payment. If they use the cheap antibiotic or the expensive antibiotic, the hospital
gets paid the same.
PAUL SOLMAN: Not true for antivirals, by contrast, which face no such reimbursement constraints.
Meanwhile, says Kevin Outterson, hospitals have come under increasingly intense cost
pressure, made even worse by the decrease in elective surgeries during COVID. So, new
antibiotics are simply too pricey, given cheaper alternatives.
KEVIN OUTTERSON: A course of treatment of a common generic might be $150 over an entire
hospital stay. And for the most expensive antibiotic, it might be $8,000 to $10,000.
PAUL SOLMAN: Ted Schroeder's drug, Xenleta, is actually just $1,000 a treatment, and even
that's too much.
TED SCHROEDER, CEO, Nabriva: So, the economic problem really is a reimbursement problem.
PAUL SOLMAN: And three years ago?
TED SCHROEDER: I don't think anyone anticipated that hospital margins would fall so low so
quickly.
PAUL SOLMAN: Finally, Tetraphase CEO Larry Edwards, whose drug Xerava is also $1,000
for a course of treatment, but his business was moribund.
What can he say to doctors, he asks, who tell him:
LARRY EDWARDS, CEO, Tetraphase Pharmaceuticals: I had a patient that came in with an intra-abdominal
infection, we gave them your drug, and it saved their life.
PAUL SOLMAN: Tetraphase sold itself in March to another small pharma firm for a song:,
one-tenth its market value just three years ago.
Now, before you despair completely, there are even newer antibiotics in the pipeline.
KEVIN OUTTERSON: We have supported 56 small companies at this point, with millions of
dollars.
PAUL SOLMAN: Kevin Outterson runs Carb-X, a public-private partnership that invests
in new antibiotics. This meeting occurred before physical distancing rules were put
in place.
Erin Duffy, Carb-X R&D chief, says it's a constant battle against bacterial resistance.
ERIN DUFFY, Former Chief Scientist, Melinta Therapeutics: It has happened in as short
as a six-month period of time, which is the whole reason that we have to keep innovating.
PAUL SOLMAN: And innovating, they have been. But will the new drugs ever get to market?
There is a bill in Congress to allow for higher prices. And the world's largest drug companies
just announced a billion-dollar fund to help bring two to four new antibiotics to FDA approval.
But then what, asks John Rex, given the reluctance to use the new antibiotics already out there.
DR. JOHN REX: You need to have $350 million in revenue over the first 10 years in the
marketplace just to break even on a cash flow basis. That's not repaying anybody that's
invested in you today. It's just keeping the lights on, so the drug is manufactured and
it's out there in pharmacies.
PAUL SOLMAN: So, as scientists exit antibiotics research in droves for other drugs, who will
create the next generation to fight the next generation of germs, perhaps in tandem with
the next generation of viruses?
DR. JOHN REX: We wish we had a therapeutic for COVID-19 right now. And the lack of that
is costing us -- I can't even begin to guess how much it's costing us. You know, if we
had a bacterial infection, it could have a similar effect.
TED SCHROEDER: If we lose our antibiotic infrastructure, that's the real threat. We lose our ability
then to create the innovations we need when we need them.
PAUL SOLMAN: Like now, when the dangers of underinvestment to prevent catastrophe are
all too apparent.
Paul Solman from Boston for the "PBS NewsHour."